Together with necessary particulars in regards to the well being of the House Fairness Conversion Mortgage (HECM) e book of enterprise contained in the Mutual Mortgage Insurance coverage (MMI) Fund, the Federal Housing Administration (FHA) annual report back to Congress additionally provides a breakdown of the product sorts most used and demographic traits related to HECM enterprise exercise.
The annual report highlights an uptick in HECM quantity but in addition particulars how claims towards the MMI Fund from the HECM program fell in FY 2022; the expansion of the HECM most declare quantity (MCA) pushed by greater appraised values of properties; racial and gender divides between segments of reverse mortgage debtors and adjustments of their common ages; and a breakout of HECM mortgage sorts together with conventional, refinance and buy loans.
Breakout between HECM mortgage sorts: H4P is down, H2H is up
Based on FHA knowledge, FY 2022, which ended on Sept. 30, noticed a complete of 64,437 endorsed HECM loans, up from 49,207 loans in FY 2021.
For as a lot because the HECM-to-HECM (H2H) refinance increase outlined reverse mortgage quantity one yr in the past, complete H2H exercise really elevated in FY 2022. H2H share of complete reverse mortgage quantity in FY 2022 accounted for 48.88% of all recorded endorsements within the yr, a slight enhance on the 46.72% determine recorded in FY 2021.
Nevertheless, 2022 additionally noticed the definitive finish of the H2H refi increase as greater ranges of HECM for Buy (H4P) mixed with a major enhance in mortgage charges, diminishing the utility of such a refinance for debtors.
Persevering with a pattern noticed since 2015, FHA additionally recorded a pointy enhance in client choice for adjustable charge mortgages (ARMs) within the HECM sphere. In comparison with the interval between 2016 and 2020 the place debtors far and away most well-liked fixed-rate merchandise, FY 2022 noticed 95.06% of all FHA HECM endorsements favor ARMs as a substitute.
“This variation in composition is, partly, a results of insurance policies applied in FY 2014 associated to the insurability of fixed-rate HECMs, together with eliminating the choice of future attracts and a discount within the quantity of principal made out there to the borrower,” the report reads relating to the ARM knowledge.
As common because it seems to be amongst a section of devoted reverse mortgage professionals, the speed of H4P loans went down as soon as once more in FY 2022, persevering with the downward pattern noticed within the final two fiscal years. H4P endorsements made up solely 3.2% of all HECMs in FY 2022. H4P penetration reached an all-time excessive in FY 2019 when it made up 7.4% of all HECM endorsements, however dropped to five.58% and 4.17%, respectively, in FY 2020 and 2021. Nonetheless, the mortgage sort has gained floor since FY 2009, the place it made up solely 0.47% of all HECM endorsements that yr.
When it comes to cost plan choices, debtors proceed to overwhelmingly want the road of credit score (LOC) draw choice, with FY 2022 seeing 92.77% of all HECM endorsements falling below it. This pattern has been in place since 2009, the place it has fluctuated between 85-93%.
Demographic, geographic reverse mortgage exercise
Whereas HECMs are solely out there to debtors aged 62 or older, there may be some notable variation within the sorts of folks throughout the age group which are in search of out reverse mortgages. When it comes to gender variations amongst single debtors, girls proceed to outnumber males with 22,702 single feminine seniors taking out HECMs in FY 2022.
Single males composed 12,555 reverse mortgage debtors in the identical interval. Loans with a number of debtors proceed to outnumber each, nonetheless, with 27,318 endorsements together with two folks.
When it comes to the racial composition of reverse mortgage debtors, they’re broadly much more prone to be white. White debtors made up 45,829 debtors in FY 2022, although shares of Black and Hispanic debtors made up extra endorsements this yr than in FY 2021.
In FY 2022, 71.12% of HECM endorsements served white debtors, 6.07% served Black debtors, 5.03% served Hispanic debtors, 1.08% served Asian debtors, and 0.31% served Native American debtors.
Geographically, HECM exercise stays concentrated in just a few key states. California stays the only largest state for HECM manufacturing within the nation, with 23.69% of all uncooked HECM quantity 31.88% of all HECM MCA coming from there. That is additionally doubtless one of many causes that the HECM program is so delicate to adjustments in HPA ranges, based on the report.
“The highest 5 states represented 49.49% of latest HECM endorsements in FY 2022, illustrating that the geographical threat profile for the HECM program has turn into extra concentrated lately,” it reads. “Because of this, future HECM efficiency will almost definitely be extra reliant on financial components similar to home worth appreciation in these particular states, significantly in California the place the share of HECM counts is 2.6 occasions better than that for Florida, the state with the second highest share of HECMs.”
As detailed earlier this week, the HECM e book of enterprise contained in the MMI Fund reached a constructive capital ratio for less than the second time since 2015, based on an annual actuarial overview of the fund’s funds and the FHA’s Annual Report back to Congress, which have been launched Tuesday. The worth of the MMIF is roughly $15.1 billion for 2022 — a pointy annual enhance in comparison with $3.8 billion valuation in 2021.
Learn FHA’s Annual Report back to Congress for the fiscal yr 2022 at HUD.